Evolution of the Brazilian Tax Administration

In Brazil, the Royal Treasury Offices – the first tax departments – appeared in 1534.

The growing importance of the Brazilian economy required a number of reforms in tax administration. In 1761, the treasury offices were replaced by Boards of the Royal Treasury; in 1831, the National Treasury and its boards appeared (later called Tax Offices) and, in 1934, the General Management of the National Treasury - a milestone in the history of tax administration – was created. It was a giant divided into departments, with four thousand subordinated bodies.

The sequence of structural reforms, the modernization and adaptation to the rapid economic growth were determining for the General Management of the National Treasury (DGFN) to be developed into the Secretariat of the Federal Revenue (SRF) in 1968, becoming an important body of the federal tax administration with sole representation for the taxpayer.

The transformation of the General Management of the National Treasury into the Secretariat of the Federal Revenue led – in organizational terms – to the replacement of the model based upon the type of taxes administered – internal revenue, customs revenue and income tax – for a functional structure with joint administration of the internal and customs taxes.

Parallel to the road taken by the Secretariat of the Federal Revenue, the contributions to social security were administered, throughout time, by several bodies. The first legal provisions on social security date from the time of the Brazilian Empire, but the year 1923 is regarded as the real start point for social security in Brazil. That is when the Retirement and Pension Fund for railroad employees was created.

Due to a governmental project, the Secretariat of the Federal Revenue and the Secretariat of the Social Security Revenue were unified in 2007.

The goal of such measure was to reorganize the federal tax administration, providing the population and the State with several benefits, such as: optimization and rationalization of tax collection and supervision processes, reduction of additional obligations, increasing tax collection without raising individual tax burden, improvement of the taxpayer service systems and more effective measures against tax evasion.

The Brazilian Federal Constitution establishes the fundamental milestones for the construction of the tax system by defining the competence of the political entities of the Federation (Union, States, Federal District and Municipalities), establishing the principles and general rules of tax Law, setting limitations to the taxing power and defining the departments of tax revenues and compulsory bindings.

The federative system adopted by the Brazilian State has the political-administrative autonomy as an essential feature, resulting in a multiplicity of bodies with typical functions of tax administration, acting in the federal, state and municipal domain.

The chart below displays the bodies of the tax administration of each federative entity.

Worldwide, Customs services are, in general, inserted in the tax administration, but separated from the fiscal departments of internal revenues. In Brazil, the lack of human resources, the length of our frontiers and shore (over 18,000 kilometers!) and other factors force an unabridged use of the available departments, so that there is an interpenetration of attributions.

Therefore, there isn’t always a central body of the customs system, which is replaced by a common administration with the departments of internal revenues. However, in many occasions of the Brazilian History, departments were implemented with functions of coordination and planning of customs activities and, mainly, contraband fighting.

In 1934, the Management of Customs Revenue was implemented within the structure of the General Management of the National Treasury and later transformed in a Department. Meanwhile, the Superior Tax Council, a court in charge of judging the customs administrative litigation, was established. Later, in 1957, the government created a new body, the Customs Policy Council, to assist the Ministry of Finance in issues related to the alteration of rates, guidelines for the establishment of minimum values and tax nomenclature.

In the 1960s, the SENAFRA – National Service for the Supervision of Customs Income – was created with the attribution of enforcing the customs laws in the so-called ‘secondary zone’, out of the customs houses’ limits.

In 1968, with the replacement of the General Management for the Secretariat of the Federal Revenue, the Department of Customs Income was closed, and its functions were performed mainly by the Inspection and Taxation Systems.

The General Coordination of the Customs Control System is not, therefore, something new in the structure of the Brazilian fiscal administration, which is obliged, from time to time, to pay more attention to the customs house – for fiscal or economic reasons. The current structure has an ideal level of integration between them all, both in the customs system and Federal Revenue and the economic policy bodies.